March 2, 2023 PSC and Overseas Entities Register do not breach Human Rights
In November 2022, the Court of Justice of the European Union (CJEU) found that the EU beneficial ownership register did not comply with the Charter of Fundamental Rights and was therefore unlawful. It is a decision criticised by transparency organisation and at odds with the direction of travel in the UK.
The UK Government has now published its position following the European ruling and has come to the view that there is no conflict with the European Convention on Human Rights (“ECHR”).
The CJEU ruling
It began when Patrick Hansen, a Luxembourg businessman and CEO of private jet company Luxaviation, challenged the EU law-mandated beneficial ownership register regime requiring the public disclosure of his name on the Luxembourg trade register, citing safety reasons. The case went all the way to the Court of Justice of the EU.
In November, the CJEU arrived at its verdict. It decided the register, a product of the Fifth Anti Money-Laundering Directive, did breach human rights. Specifically, the absence of demonstrating “legitimate interest”, created a regime that allowed for privacy intrusions which were more than were strictly necessary to prevent and detect money laundering and terrorist financing. They ruled the regime did not comply with Articles 7 and 8 of the EU Charter on Fundamental Rights which protects personal data and privacy rights.
The CJEU ruling is not strictly relevant to the UK position and the EU Charter on Fundamental Rights is not binding law on the UK. However, Article 7 of the EU Charter on Fundamental Rights is equivalent to Article 8 of the ECHR, which is relevant law for the UK. As a result, the UK Government has re-evaluated its position in this regard.
The UK Government’s view
The Economic Crime and Corporate Transparency Bill (ECCT) is currently making its way through parliament and the UK government took the opportunity, ‘prompted’ by the CJEU, to review both the Persons of Significant Control (PSC) regime (who owns and/or controls UK companies) and Register of Overseas Entities regime (ROE) (who owns and/or controls UK property) from a European Court of Human Rights perspective (ECHR).
When the PSC and ROE were introduced in 2015 and 2022 respectively the Government decided that although making personal details of PSCs and RBOs public was an “intrusion” on Article 8, the intrusion was proportionate and “necessary in a democratic society for the prevention and detection of crime and in for the economic well-being of the country.”
The government has reaffirmed that its approach is still compatible with the ECHR on the basis that PSCs, RBOs, and other individuals can apply to the registrar to “suppress” information from the publicly inspectable register where there is a risk of violence or intimidation to the applicant or their family.
In fact, the government has gone a step further in the direction of transparency in the current Bill by removing locally held PSC registers and the added confidentiality they provided. Locally held registers contain more information such as date of birth and residential address. A ‘proper purpose’ safeguard was put in place to safeguard access and guard against “vexatious or repeated requests”. However, by reverting to a single central register, the proper purpose requirements have been removed. The government’s justification was:
- the deterrent on financial crime effects outweighs any negatives.
- the practice undermines transparency because the public may not wish to disclose their reasons for access or are concerned about legal disputes.
- the practicality of maintaining a proper purpose requirement for PSC data but not other forms of central data e.g. main company register.
The government’s policy paper can be found here.
Recent coverage of ECCT shows the topic of economic crime in the UK remains a high-profile and politically sensitive topic. Despite criticism of shortcomings, ROE appears to be doing the job it was set up to do and many newspaper column inches have been dedicated in the last month to shining a light on who owns UK property. With this in mind it is hard to see the CJEU ruling as anything but a backward step.
However, given the CJEU’s decision, there is clearly a risk that a party will take the issue to the European Court of Human Rights to obtain their view on the validity of the PSC and ROE regime disclosures